A Home Equity Loan Is It For You

Writen by Sarah Freeland

When you purchased your home, you committed to a home loan in the form of a mortgage. Your mortgage may be a fixed or variable interest rate. This is called a first mortgage. Over the years the economy may change and the interest rates may be lower than the rate you have. At this point, you may wish to refinance your home. There are costs associated with your refinance, including closing costs and some government-regulated fees. Be sure to research other lenders besides the one you have already, to see if you can get a better interest rate or reduction in closing costs. This is not a second mortgage, but a replacement for the first mortgage you had previously.

A second mortgage is one you take out in addition to your first mortgage. It usually has a fixed interest rate and a specific loan period of time in which to repay it, just like your first mortgage. Some people do this to take equity out of their homes for spending purposes, such as home improvement. You can also take an equity loan which is usually at a variable interest rate and is open-ended with regard to the loan period. This type of loan is also known as an equity line of credit. Sometimes this loan may be for debt consolidation, such as credit card debt or auto loans.

You can take out a home improvement loan with many of the same characteristics of a mortgage. With any of these loans, you will get a better interest rate if you have good credit. You must be sure that you can afford to make two house payments, since you are spending the equity in your house and are committing to another payment.

For more on debt management and credit repair visit the resource center at DebtControlExperts.com. If you are in the market for a home equity loan, auto loan or mortgage, visit FundingMarketplace.com for financing options.